McNair Paper Number 50, Chapter 7, August 1996

Nelson's major task, as it turned out, was administration of the Controlled Materials Plan-the allocation of raw materials to the specific industries that produced the weapons systems. Nelson wrote, in an oversimplification, that war production could be broken down into three sections, only one of which was truly his. First was establishing requirements. What kind of and how many of the munitions were needed by each armed service and ally. The president and the joint chiefs and the combined chiefs determined the requirements, and the War Production Board translated those decisions into production requisites. Once that was known, the Board had to decide how much of what systems the economy was capable of producing. And with that known, the next task was balancing resources against demands. Balance was critical. Everything could not be produced at once; raw materials had to be carefully apportioned because to overproduce one munition would mean that another would be underproduced. (Note 1) To ensure that production was tightly balanced, the War Production Board centralized control of raw materials. To ensure that the British were operating under the same plans as the Americans, Roosevelt established a Combined Raw Materials Board in late January 1942. (Note 2)

The Controlled Materials Plan replaced the Production Requirements Plan (a November 1941 voluntary program) that had permitted manufacturers to state production material requirements for government orders. The Controlled Materials Plan, administered by the Production Executive Committee, chaired by Charles E. Wilson of the War Production Board, was a "vertical allocation plan, under which allotments were made by programs and passed down through the chain from procurement agency [i.e., the armed services] to prime contractors to sub- and sub-sub-contractor, whereas in the [Production Requirements Plan] direct applications had been received from all levels in the subcontracting plan." The Controlled Materials Plan was a "more accurate" and "more equitable and more effective distribution of materials." It was announced on 2 November 1942 to become effective in the second quarter of 1943 and fully effective in the next quarter. It was certainly superior to the Army and Navy Munitions Board priorities system in rationalizing the distribution of materials. (Note 3)

In reality the Controlled Materials Plan was a method of forcing all consumers of raw materials to plan for themselves. No order for raw materials could be accepted until the Production Executive Committee had in hand an exact statement of raw materials requirements. The allocations were made quarterly and, for the first time in the war, the Armed Forces procurement agencies were forced to consider their future demands within the "context of long-term strategy." (Note 4) Controlled materials planning was a massive undertaking. Two streams of paper carried requirements and allotments information through the "interlocked industrial and governmental structure:"

The first stream of paper, leading up the supply-demand balance for the total economy determined each calendar quarter by the War Production Board Requirements Committee, began at the lowest layer of manufacturing subcontractors. Bills of materials (detailed schedules of amounts of each controlled material required to make one unit of a fabricated product) were transmitted up the manufacturing ladder to the assemblers of end products and other prime contractors. There they were accumulated, each prime contractor combining his own and his subcontractors' material requirements, and transmitted to the procuring claiming agency. From bill-of-material information and other sources, each claimant agency prepared estimates of controlled-materials requirements in total and by program detail and submitted the estimates to the [War Production Board] controlled-material branches (steel, copper, and aluminum)and the Requirements Committee staff. . . . The second stream of paper began at this point with the allotment of materials to each claimant agency representing its share of the anticipated supply of each controlled material available for purchase directly by the agency and by its prime and subcontractors . . . the claimant agency distributed allotments (authorizations to purchase) to its prime contractors. The prime contractors retained that part of the allotments necessary to cover their own direct procurement from the metal mills and reallocated the remainder to their suppliers. (Note 5)

Although the literature usually speaks of three raw materials in the Controlled Materials Plan-steel, copper, aluminum-there were actually 13 categories of carbon steel and 10 of steel alloy to be allocated separately, and 4 classes of copper-based alloy products, 3 classes of copper shapes, and wire mill and foundry products. Aluminum products came in 21 classes of shapes and alloys. But the revolutionary step in the Controlled Materials Plan was not in these refined allocations. It rested rather on the principle that the delivery of materials were "not affected by preference ratings." Meaning once the Requirements Committee "determined the distribution of steel, copper and aluminum which in its judgment was best calculated to meet war, export, and essential civilian needs, all approved programs had equal validity." (Note 6) To the War Production Board, that is. Certainly the War and Navy Departments (and other claimants like Lend-Lease Administration, Maritime Commission, Office of Civilian Supply, and even other agencies later in the war) did not think that all approved programs had "equal validity." At times different systems had higher priorities, like the necessity of accelerating the building of landing craft in 1942 and 1943, and especially in the first half of 1944 for Operation Overlord and amphibious assaults in the Pacific. (Note 7) The Controlled Materials Plan forced a strict accounting on all users of steel, copper and aluminum, but the key civilian agency turned over most of these precious materials to the military for their further allocation based on grand strategy.

The Controlled Materials Plan worked well to solve a nagging problem-controlling what was built and when by releasing or withholding raw materials-but it consumed many thousands of people and much time. Nelson was in the sorry position of simply not being able to satisfy everybody all the time. "He was battered, abused, and cajoled by other agencies" of the government. Instead of being the interwar planners' ideal of a wise man surveying the war from an unmatched viewpoint and apportioning economic strength where it would do the most good, he was thoroughly inside the turbulent milieu, a "much abused referee of a free-for-all fight among agency heads who knew no rules and were not above loading their gloves with Congressional blocs, pressure groups, and an occasional chit initialed by Roosevelt at their urging." (Note 8)

Nelson's two biggest problems, and thus those of his organization, were Roosevelt's unwillingness to support him in his inevitable disputes with the plethora of wartime agencies and Roosevelt's continued penchant for creating potentially rival agencies. There were powerful prewar New Deal agencies like the Reconstruction Finance Corporation (which added to its authority the Defense Plant Corporation, Defense Supplies Corporation, Metals Reserve Company, Rubber Reserve Company) whose role might conflict with Nelson's Board. And there were venerable institutions like the War and Navy Department that had been created in the 18th century that might see activities of the War Production Board as usurping their authority. Many other war agencies were founded before the War Production Board-like the Board of Economic Warfare, the Office of Lend-Lease (with the powerful Harry Hopkins in charge initially), the Office of Defense Transportation-that had charters that overlapped Nelson's. Other agencies founded after Nelson's, such as the Petroleum Administration for War, Rubber Development Corporation, War Manpower Commission, and dozens of others, had charters that seemed to authorize powers that the War Production Board also possessed. Soon after Nelson was appointed chairman, the War Shipping Administration and National Housing Agency were founded, and Nelson failed to move quickly to have these subordinated to him. He willingly gave away rationing authority to the Office of Price Administration. Probably his most serious lapse (other than permitting the services to procure their own munitions) was permitting the War Manpower Commission to be independent of him. This agency, created on 18 April 1942 to "assure the most effective mobilization and maximum utilization of the Nation's manpower in the prosecution of the war," was offered to him by Roosevelt. However, Nelson permitted it to be independent. (Note 9) All this might have been manageable if Roosevelt were a manager, which he was not; and if he had appointed a person to run the War Production Board whom he trusted explicitly, which he did not; and if Nelson were more aggressive bureaucratically. Nelson was ineffective, thus the industrial mobilization effort suffered. The military never saw itself as Nelson's partner and involved itself in "every facet of the home front war program." When there was a problem such as with deliveries of finished goods, the military would intrude in the transportation business. If there were a labor problem, manufacturers would deal with the military rather than to the War Labor Board to solve it-turning to the agency paying the bills. It was easy to turn to the military to solve problems in time of a total war. It might not have been wise over the long term, or even efficient, but it was easy because the military had enormous prestige. The military was seen at least as equal to the War Production Board in power and influence, and that perception helped the military outmaneuver the Chairman of the War Production Board. (Note 10)

Philosophical differences also marred the relationship. Nelson's concern for the civilian population, those who worked in the factories and operated the farms, was interpreted by some in the Army as "pampering" civilians. Nelson complained about "bitter fights" with the Army over manufacturing tractors or spare parts for cars, washing machines, refrigerators, etc. (Note 11) Nelson, from the beginning of the war well into the peace that followed, insisted that the economy had to be controlled by civilians. He argued that "military men are bound to place above everything else the needs of specific munitions programs." If they did gain complete authority over the country's resources, Nelson maintained, they "would inevitably produce disorder, and eventually balk their own efforts by undercutting the economy in such a way that it could not meet their demands." He saw other dangers. He had a bitter and "long-drawn-out" argument with the Army over allocation of newsprint to newspapers. "Since the demand for paper was so much greater than the supply, we had to limit each publisher to a certain amount of newsprint. . . . But reducing the amount of paper a publisher may have is one thing, and telling him what he may do with it is quite another. The Army vigorously maintained that we should adopt the latter course." The Army was especially eager to stop publishing of comic strips. Nelson asserted that a government that uses "its control of newsprint to forbid the printing of comic strips is in the publishing business. If it can stop the printing of comic strips it can-and inevitably will forbid the publication of cartoons and other material, perhaps ultimately of certain classes of editorial matter, which, in its opinion represents a waste of newsprint." His running battle got into the press, much to his chagrin. "The Army had at its disposal and freely used many unfair methods of needling anyone who stood in its way. . . . Very soon after I had made, and stuck to" the decision on making spare parts for appliances and automobiles, U.S. factories were no longer producing in order to keep these labor-saving machines in some working order, "articles began appearing in the press stating that 1,500 plants making munitions of war were going to have to shut down because they could not get materials. War Department officials in high places were feeding out those [false] stories." (Note 12)

The Army leaked similar stories regarding Nelson's decision to produce synthetic rubber for civilian automobiles, trucks, and buses. The press following the Army's lead reported that bombing operations would soon be stopped because Nelson was diverting materials for civilians. Of course, bombing operations did not stop. To Nelson at least, the Navy Department seemed more attuned to the needs of civilians-after all how would workers get to factories or shipyards without automobiles and buses, and how productive would they be if their needs were neglected? But the "top men in the Army's supply setup . . . consistently opposed giving any consideration to even the most essential civilian needs." A major example was their fight against "allocating material or machinery for the production of farm machinery, insisting that the farmer could use his old equipment and did not need anything new." General Brehon Somervell, Chief of Army Services of Supply, "insisted that repair parts were not needed, not even for coal-mining machinery" and insisted that a major coal mining machinery manufacturer be forced to make munitions. (Note 13)

Nelson began this battle before the U.S. declaration of war. In 1940, the Army Air Forces stopped the building of 40 aircraft by Douglas Corporation that were slated for civilian airlines to divert Douglas' effort to the military, but Nelson recognized something the Army Air Forces could not or would not see-all airplane construction could not go to the military because some airplanes had to be used to move passengers and cargo around the United States quickly. This myopia on the part of the services frustrated Nelson to the point that he petitioned Roosevelt to let him return to Sears. Nelson at this time was working for the National Defense Advisory Commission and believed that making the Commission non-advisory would change everything. As it turned out, he was wrong. (Note 14)

Nelson writes that Roosevelt told him that both he and the President had to beware of the Army acquiring "too much power." In a democracy, the president argued, the economy "should be left in charge of civilians." Roosevelt told Nelson "to fight for" his rights when "such issues" as civilian versus military control arose. Nelson was proud of the fact that "no other outfit in the world ever fought the Army of the United States to a standstill more frequently than the intrepid patrol of the [War Production Board]". (Note 15) Pundits 50 years later can draw their own conclusions about the Nelson vs. Somervell (et al.) conflicts. Civilian patriotism coexisted with opportunism within the same breast, and both the Army and the Navy wanted to promote and exploit the former and dampen the latter. They wanted to ensure that the latter did not hurt their mission of winning the war as quickly as possible with a minimum loss of American life.

Most serious students of the period agree that the Army wanted to direct the economy in wartime, something it had desired because it was wary of the motivations of big business during a war. Somers notes that, soon after the War Production Board was formed, General Brehon Somervell made a play to put the new Board under the control of the Joint Chiefs of Staff. By permitting Somervell and his Navy counterparts to control procurement, Nelson undermined his own position of civilians controlling the economy. Somers writes: "The Army and Navy came to regard Nelson and the [War Production Board] as advocates of a comfortable civilian economy, which would resist to the end curtailments to expand military production." Somers observed that the dispute with the Army and Navy became rancorous. (Note 16) We have seen, however, that Nelson wanted to convert the automobile industry to munitions production well before the Japanese attacked Pearl Harbor, and that his first action as chairman was to do just that.

In addition to leaving military procurement to the Navy and War Departments, Roosevelt did not give Nelson the authority (nor, apparently did Nelson insist on it) or the tools to control inflation, which increased as the large pool of unemployed workers dried up. The president recognized that wages, prices, and rents had to be stabilized if the politically costly boom-and- bust experience that followed World War I was to be avoided. In September 1942, Roosevelt asked Congress for the powers necessary to fix wages and prices, including agricultural prices. Congress yielded on 2 October, granting the president authority to issue a "general order stabilizing prices, wages, and salaries affecting the cost of living, and empowering the president to create the Office of Economic Stabilization. On 3 October 1942, Roosevelt appointed James F. Byrnes as Director.

The ultimate insider, Byrnes quickly resigned from the Supreme Court and began his new job on 15 October. He had blanket authority "relating to control of civilian purchasing power, prices, rents, wages, salaries, profits, subsidies, and all related matters." The Director of the Office of Economic Stabilization was to be the final judge of any jurisdictional disputes among the various wartime agencies and within the president's executive office regarding economic policy. Byrnes was to the civilian economic strategy what Roosevelt was to the war's grand strategy. Very significantly, Byrnes was able to set up his office in the White House. Roosevelt told Byrnes: "Your decision is my decision, and . . . there is no appeal. For all practical purposes you will be assistant President." (Note 17) Had he said that to Nelson (or had Nelson demanded and received such power), the War Production Board might have turned out to be the supreme mobilization agency the interwar planners called for. Might have, rather than would have, because it is not clear that Nelson's personality was up to using such a full grant of authority. Somers argues that Nelson, a man of "great abilities and character," was "probably not temperamentally suited to the onerous job he undertook . . . He was mild mannered and intellectual, not given to quick decisions. He was not adept at and did not welcome the 'infighting' or the power struggles involved in high administration" jobs for "high stakes." Somers concludes that Nelson was "too nice a guy for the job." (Note 18)

The dispute between the Army and Nelson that drove him out of office was over industrial reconversion. Reconversion has always been badly handled in the United States; indeed, the Woodrow Wilson administration mishandled it in the late teens (causing heightened unemployment) and cost the Democrats control of the Congress and White House in 1920. Nelson wanted to begin reconverting industry as soon as feasible, and many in Congress were eager to have factories in their districts and states reconvert, too. Nelson directed one of his key assistants to study reconversion in April 1943, making clear that he intended to move into this controversial area. War production peaked in November 1943, although for some items, like airplanes, 1944 was a bigger year.

There was a sharp decline in war orders in 1944. But the Army wanted no reconversion of industry because it might lead to a slackening of the war effort. The Army would have been happy if there were pools of unemployed workers forced to seek positions in war industries and unable to opt for better paying or more secure jobs in factories producing for the civilian market. Truman is on record calling for "an orderly resumption of civilian production in areas where there is not manpower shortage and with materials not required for war production." Nelson began to reconvert slowly, but the Army was powerful, and some business leaders also fought reconversion because they were tied to war production and did not want competitors to get a leg up in the potential market. The Army forced Nelson's removal in summer 1944. (Note 19) By the time Roosevelt sent Nelson to China on assignment to get him out of town, the president had already established, on 27 May 1943, an agency that superseded the War Production Board: the Office of War Mobilization, the last of the series that began with the War Resources Board in August 1939. Significantly, the president installed James F. Byrnes to run this new organization.